Carclo Regulatory News (CAR)

RNS Number : 1434F

Carclo plc

12 June 2012

 

 

 

 

 

For immediate release

12 June 2012

Carclo plc

("Carclo or the group")

 

 

Carclo plc, the technology led plastics group, today announces its full year results for the year ended 31 March 2012.

 

Highlights 

 

 

·; Revenue increased by 5.2% to £93.3 million

 

·; Underlying profit from operations increased by 12.3% to £6.6 million

 

·; Cash generated from operations increased to £10.4 million (2011 - £6.8 million) and free cash flow increased to £6.5 million (2011 - £1.1 million)

 

·; Total dividend increased by 9.1% to 2.4 pence per share

 

·; Conductive Inkjet Technology focussed almost entirely on the fine line touch screen project with Atmel Corporation and volume production shipments to multiple customers are expected shortly

 

·; Excellent technical progress at Carclo Diagnostic Solutions which has developed a range of highly novel single use point-of-care diagnostic devices. Initial commercial discussions are underway with a potential partner

 

 

Commenting on the results, Christopher Ross, chairman said -

"Carclo delivered sound financial results and excellent strategic progress for the year ended 31 March 2012.

 

Following an extensive strategic review we are expanding Conductive Inkjet Technology and expect it to become the most profitable and fastest growing business within the group."

 

Enquiries

 

Carclo plc	020 7067 0700 (today)
Ian Williamson, chief executive Robert Brooksbank, finance director	01924 268040 (thereafter)
Weber Shandwick Financial	020 7067 0700
Nick Oborne/ Stephanie Badjonat/ Robert Cook

 

A presentation for analysts will be held at 9.30 a.m. on 12 June 2012 at the offices of Weber Shandwick Financial, Fox Court, 14 Gray's Inn Road, London WC1X 8WS.

 

 

Notes to editors

 

About Carclo

 

Carclo plc is a technology led plastics group. It is a public company whose shares are quoted on the London Stock Exchange.

 

Two thirds of sales are derived from the supply of fine tolerance, injection moulded plastic components, which are used in medical, optical and electronics products. This business, Carclo Technical Plastics, operates internationally in a fast growing and dynamic market underpinned by rapid technological development.

 

A third of sales are derived from the supply of specialised precision products to the premium automotive and aerospace industries. Carclo is a leader in the development of high power LED lighting for supercars.

 

Carclo's strategy is to develop new technologies and products to drive future growth. Its investment in Conductive Inkjet Technology is at the heart of the newly emerging market for very low cost printed electronics.

 

Forward looking statements

 

Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events to differ materially from any expected future events or results referred to in these forward looking statements.

 

 

Chairman's statement

 

Carclo delivered sound financial results and excellent strategic progress for the year ended 31 March 2012. Group revenue and profit from operations before exceptional items showed good growth and benefitted from a strong second half performance. The highlights for the year were -

 

Financial highlights ·; Revenue increased by 5.2% to £93.3 million ·; Underlying profit from operations increased by 12.3% to £6.6 million ·; Net exceptional charge of £1.8 million (2011 - £0.2 million credit) due mainly to the non-cash impairment charge associated with our planned and successfully implemented withdrawal from the volume automotive communications business ·; The net effect of exceptional items was to reduce profit after tax from £5.9 million to £4.6 million andbasic earnings per share from 9.6 pence to 7.5 pence ·; Underlying basic earnings per share increased from 9.6 pence to 9.7 pence ·; Cash generated from operations increased to £10.4 million (2011 - £6.8 million) and free cash flow increased to £6.5 million (2011 - £1.1 million) ·; Total dividend increased by 9.1% to 2.4 pence per share ·; Committed bank facilities renewed during the year until November 2015 and group net debt reduced to £18.0 million (2011 - £19.1 million) Operational highlights ·; The focus at Conductive Inkjet Technology ("CIT") has continued to be almost entirely on the fine line touch screen project with Atmel Corporation ("Atmel"). This project has taken a major step forward with Atmel's announcement in April 2012 of the commercial launch of its XSense™ touch sensor product based on CIT's fine line technology and production shipments to multiple customers are expected to commence shortly ·; Excellent technical progress at Carclo Diagnostic Solutions ("CDS") which has developed a range of highly novel single use point-of-care diagnostic devices. Initial commercial discussions are underway with a potential partner ·; In Technical Plastics, underlying operating profits were level at £5.0 million. Excellent results from our expanding Indian operation offset the effect of short term inventory corrections at some customers in the final quarter and disappointing LED optics sales in the second half ·; In Precision Products, underlying operating profits increased to £3.2 million (2011 - £2.2 million) helped by strong performances from Wipac's supercar lighting business and our Precision Engineering businesses Strategic highlights

 

·; The board has decided to retain and develop CIT as a core Carclo business following consultation with our major shareholders. CIT's Cambridge facility is being expanded to support the fast ramp-up of XSense™ touch sensor production and to provide resources to drive growth in printed electronics

 

·; A new LED Technologies division has been formed to combine our LED supercar lighting and LED optics businesses

 

Dividend

 

The proposed final dividend of 1.65 pence per share brings the total dividend for the year to 2.4 pence per share (2011 - 2.2 pence). This represents an increase of 9.1% and reflects the sound operating performance for the year and the board's confidence in the group's prospects.

 Employees

 

I would like to thank all those employed by Carclo in the year under review for their significant contribution.

 

Board changes 

As confirmed in June 2010 Ian Williamson will retire in March 2013 after eighteen years as chief executive. The board has been preparing for his succession for some time and I am pleased to report the appointment of one of our executive team as chief executive designate. Chris Malley has been with Carclo for thirteen years, and has held senior management positions in finance, corporate development and then as divisional chief executive of our Card Clothing Division which was sold to Bekaert in 2005. He supervised the transition to Bekaert ownership but then elected to stay with Carclo as chief executive of CIT. Chris has developed CIT from a very small research team into the significant operation which we have today. He will be appointed to the board as executive director effective 1 July 2012 but will remain focussed on the development of CIT until the end of the year. There will be a short handover period with Ian and then Chris will become chief executive on 1 March 2013.

 

We feel that a new chief executive should have the opportunity to develop a working relationship with the chairman over at least a full three year term. I have been on the board of Carclo for nearly nine years and have served over five years as chairman. I will therefore retire from the board at the AGM in September and Mike Derbyshire, who has been on the board since January 2006, will succeed me as chairman.

 

We are keen that the composition of the board reflects the challenges and opportunities that the company faces. We have therefore looked for a new non executive with experience of the type of fast moving, technology business that Carclo has become and we are fortunate that Robert Rickman has agreed to join the board with effect from 1 July 2012. Robert was a key player in the development of Bookham Technology plc. He is now a partner in Rockley Group, a private technology investment group with interests and funds in the UK, USA and China. Robert has a broad business experience and will bring new insights to our board.

 

Outlook

 

Conductive Inkjet Technology's touch sensor project is set to commence volume production following Atmel's announcement in April of the commercial launch of its XSense™ touch sensor product based upon CIT's fine line technology. A substantial increase in production capacity is underway at Atmel and at CIT which will contribute meaningfully to revenues in the current year.

 

Our core manufacturing businesses continue to perform well. Recent contract awards and the expansion of the Indian operation will generate growth and support increased profitability in our Technical Plastics division.

 

In Precision Products, our well-timed exit from the automotive antenna business enables us to deploy further resources to accelerate the expansion of our specialist LED Technologies division. We are working on a number of new contracts which will deliver further growth.

 

These developments taken together give the board confidence that the new financial year will be transformational for Carclo.

 

Christopher Ross

 

12 June 2012

 

 

 

 

Chief executive's review

 

Strategic development

 

Over the last ten years Carclo has pursued a consistent strategy of focusing on high value, long term growth markets such as medical products and LED lighting technology, whilst committing some of its capital investment to new technologies capable of transforming the future of the group. As part of this strategy, low growth and low margin businesses have been divested or closed, freeing up resources for exciting new businesses such as Conductive Inkjet Technology ("CIT"). Our LED lighting division, already representing a significant proportion of group turnover, is the most developed result of this commitment to risk investment in new technologies, but we expect much more from CIT and from Carclo Diagnostic Solutions ("CDS").

 

We now expect CIT to become the most profitable and fastest growing business within Carclo over the coming years. As with all inventions, there has been an element of good fortune. The original development project was aimed at printing copper onto shaped and moulded plastic components. This developed into roll-to-roll digital printing (now in commercial production as InkJetFlex), and then into fine lines on glass substrates for Organic LED ("OLED") displays, before today's Fine Line Technology ("FLT") emerged capable of high speed roll-to-roll production of touch sensors. This technology has now been launched by our partner Atmel Corporation ("Atmel") as XSense™. XSense™ addresses a market, valued at $4.0 billion today, which is forecast to double in size over the next three years. Around a quarter of Atmel's XSense™ revenues will accrue to CIT as sales of photosensitive film. It is clear from the public launch of XSense™ that Atmel has ambitious goals for its market share - and we will share in its success.

 

The Carclo board has been determined to capture the value created by the CIT inventions for the benefit of our shareholders. Last year we appointed advisors to evaluate a range of options for the future of CIT. The three main options that we reviewed were disposal to a strategic buyer, a partial disposal to private equity maintaining a substantial minority shareholding, and retention of CIT with increased investment in its wide range of applications and markets. Our review showed that there was significant interest in CIT, and that a realisation at least in line with the value implied by the Carclo share price was possible. However, I am pleased to report, that after consultation with major shareholders, and careful consideration by the board, we have decided to retain and develop CIT as a core business within a technology-driven Carclo.

 

In my experience the City is wrongly criticised for short-termism. We have enjoyed consistent support for our strategy of re-positioning Carclo as a company centred on technology and, on this critical strategic decision, our major shareholders looked for long term success, not short term gain.

 

 

Conductive Inkjet Technology

 

Future strategy

 

For the last two years we have been focussed, almost entirely, on the FLT technology for the Atmel XSense™ touch sensor. However, CIT has three other significant business opportunities -

 

·; Printed Electronics where CIT's interconnect technology, in printed and FLT form, enables new low cost and disposable products

·; FLT on glass to replace the front electrode for OLED lighting products

·; FLT on plastic film as the front electrode in printed Organic PhotoVoltaics ("PV")

 

CIT is being restructured to bring a separate focus and resource to each of these large market opportunities. A dedicated Atmel project team will be established to run the Cambridge and Colorado based high speed coating lines and the Cambridge based XSense™ production pilot line. A new Printed Electronics team will develop the existing printed electronics business. Additional metallisation capacity will be added to allow us to extend the customer base. The key technical development will be to add additional printing, product conversion and component placement capability to enable fully functional products to be produced on a roll-to-roll basis. The OLED FLT projects will remain in the core R&D group, but with expanded resources.

 

Capital investment for this growth strategy will be approximately £3.5 million in this current year, and we will add more technical staff in addition to the production staff required by the Atmel XSense™ ramp-up. We are in the final stages of securing a dedicated production unit, close to our existing Cambridge facility, which will be operational in early 2013.

 

Our objective is to develop the printed electronics and OLED revenues to match the revenues from the XSense™ project.

 

 

CIT Operations

 

The XSense™ project is making excellent progress both technically and commercially. In the last six weeks alone we have supplied production samples to eight major device manufacturers covering seven different phone models and three tablets. Atmel's engagement in the industry is impressive. The Gen 3 process has migrated to Gen 3.1, giving higher manufacturing yields and improved robustness for the module manufacturers, and a new innovation in the sensor pattern design has delivered further improvements in visual performance. Yields from our Cambridge pilot line are now well above our targets and we are particularly pleased with the yields being achieved on the larger area sensors. This suggests that the technology may be scalable to much larger screen sizes.

 

Implementation was more challenging than we expected and there have been changes to the scope of the project. The most important change has been the need to bring the Colorado production facility up to capability alongside the Cambridge pilot line before production shipments commence. Since the Japanese Tsunami (and the Thai floods), supply chain security has become critical. We expect Colorado to be at the required yields by end of June and the first production shipments should commence during the third quarter of 2012.

 

Atmel has already committed the capital expenditure to treble the capacity of the first Colorado production line. This committed expenditure lifts production capacity to the equivalent of 120 million 3.1 inch equivalent screens. Additional capital expenditure for a further production line to come on-stream in mid-2013 has now been approved.

 

CIT supplies the photosensitive film for all sensor production lines. We have sufficient film capacity for the current Cambridge pilot line and the initial Colorado line. We have designed and ordered a high speed coating line which will be installed in the new Cambridge production facility - this line will have the capability to produce film for up to half a billion 3.1 inch screens. Additionally, to guarantee supply continuity, Atmel has agreed to fund a duplicate coating line which will be installed in Colorado, and will be operated by CIT as an active second source. We will therefore have a surge capacity available in 2013 for up to1 billion screens per annum.

 

The technology world does not stand still. Touch sensors today are mounted above the LCD or OLED display - the touch sensor is 'on-cell'. Displays will shortly emerge with 'in-cell' sensors (integrated within the display itself), and we are testing compatible substrates to meet these 'in-cell' applications. We also have flexible and moulded display applications in development and are now providing technical support for these applications from Carclo Technical Plastics. As Atmel's product launch makes clear - XSense™ enables new design concepts.

 

In printed electronics, InkJetFlex has continued to grow, but because XSense™ has priority, we have constrained new customer projects. Despite this, enquiries are at a high level and with a dedicated management focus we are confident of delivering good growth. In the last year we have completed development of a flexographic printing solution. This enables double sided circuits and side to side interconnection which significantly expands the universe of applications for the CIT technology. One of the key attributes of the InkJetFlex circuits as opposed to other printed electronic solutions is the ability to attach standard surface mount components using low cost solders. During the coming year, we plan to expand our InkJetFlex pilot line to include surface mount attachment as a reel-to-reel process. These developments open up many new and high volume applications for the CIT technology.

 

We have continued to apply R&D resource to the OLED projects. We have signed a new Joint Development Agreement with Cambridge Display Technology Limited which covers the use of our Fine Line Technology in printed OLED lighting. This is a joint commercial project with short term goals in terms of performance and product launch. We continue to support Eight19 Limited, a Cambridge based organic PV specialist, on a joint Technology Strategy Board funded project to produce printed organic solar cells. The roll-to-roll production processes for printed organic PV are very similar to the XSense™ production technologies and we are therefore well placed to engage more broadly with the printed PV sector.

 

 

Carclo Diagnostic Solutions

 

Last year we formed Carclo Diagnostic Solutions to hold, develop and exploit our intellectual property rights in a novel single use Point-of-Care diagnostic device which we have branded as micropoc. We have established a small bio-chemistry unit based at Science and Technology Facilities Council Daresbury Laboratory and supported this unit with hardware development resources from Carclo Technical Plastics and CIT. Research and development expenditure in the year amounted to £0.6 million and we also invested £0.5 million in Platform Diagnostics Limited ("PDL") to give us a controlling interest.

 

There are three platforms within the micropoc family -

 

·; micropoc-lite - is aimed at simple tests on whole blood, with the sample itself being used to give a visual test result. micropoc-lite has no electronics and is a very low cost solution. We have a working test for blood group type ("ABOD"), and have completed proof of principle work on a haematocrit test to measure red blood cell count

·; micropoc-cat - also works with whole blood, but uses CIT's low cost sensor technology to provide a quantitative, permanent record of the result. We have a working test for blood coagulation time, and expect to shortly complete proof of principle work on a C-reactive protein ("CRP") assay. These assays represent very large market opportunities and have attracted significant commercial interest

·; micropoc-pro - this platform has been developed with the technical support of EKF Diagnostics plc for the Argutus Medical kidney function markers. Proof of concept work is almost complete. The micropoc-pro platform integrates an optical reader into the disposable test chip, and it can potentially be applied for a wide range of established ELISA assays. As with micropoc-cat, this opens up a very large market opportunity

 

Technical progress in the last year has exceeded our expectations and the market opportunity is larger than we initially targeted. We have already initiated commercial discussions with a potential partner but have not yet decided on the most appropriate partnership strategy to fully exploit our technology. However, we do not plan to enter the diagnostic market directly; we will always work through partners whilst retaining manufacturing rights for Carclo Technical Plastics.

 

The micropoc technology is unique. These tests give accurate, quantitative, permanent results without the need for separate readers or desktop instruments. The patented features to apply, measure and meter the sample should facilitate a Clinical Laboratory Improvements Amendments ("CLIA") waiver allowing the test to be used by non-clinicians. The manufacturing cost of micropoc is no greater than the test strips or cartridges used in many desktop instruments. This is a compelling proposition and we expect micropoc to provide substantial growth for Carclo's medical plastics business.

 

 

Operating review

 

	Carclo Technical Plastics		Carclo Precision Products
	2012	2011	2012	2011
Revenue	£58.3m	£55.8m	£35.1m	£33.1m
Underlying operating profit *	£5.0m	£5.0m	£3.2m	£2.2m
Net assets	£50.9m	£50.8m	£15.9m	£15.8m
Underlying operating margin	8.7%	9.0%	9.0%	6.7%
Return on capital employed *	9.9%	9.9%	20.0%	13.9%
Average number of employees	745	763	267	282
* before rationalisation costs, exceptional pension credits and property profits

 

Carclo Technical Plastics

 

Sales in Carclo Technical Plastics grew by 4.5% to £58.3 million. Operating profits were steady at just over £5.0 million. Sales growth came principally from existing customers in medical diagnostic products and ATM components.

 

Looking at performance from a regional perspective, the strongest growth was in India where we supply ATM components and assemblies. We expect further growth over the next two years and in April 2012 we purchased the factory and adjacent land to enable additional capacity expansion. Our Czech operation is replacing work transferred to India with new customers focused on highly technical components. China is in transition from being a 100% export orientated unit to having an increasing involvement in the growing Chinese healthcare market. For example, our China plant is making the consumable components for the Quotest diabetes platform marketed by EKF Diagnostics plc. The US and UK operations continued to perform well enjoying growth from established medical diagnostic customers.

 

Performance at our LED optics business was disappointing in the second half - growth stalled as expected new contracts failed to materialise. This was not an external market issue; we made some mistakes in terms of product development and priorities. We have responded by merging the LED optics business with our very successful supercar lighting business from the start of the 2012/13 financial year to form a focussed LED Technologies division.

 

Generally, we were extremely busy last year with business development. In the US we see large opportunities, often requiring global manufacture, from US based multinationals. Despite very high quote activity, decision making was slow, perhaps reflecting global uncertainties, but there have been encouraging signs of a pick-up in customer commitments in the last three months. We expect to be adding capacity to our US operations this year. In the UK, business development is a longer process - our most important source of new contracts is from innovative new businesses which take some years to develop into major customers - but we have some exciting new projects which are now gaining momentum.

 

This broad base of customers in the medical field gives us confidence for the future growth of the division.

 

 

Carclo Precision Products

 

The Precision Products division delivered an excellent result with underlying operating profits up by 43.9% at £3.2 million, on sales ahead by 6.0% at £35.1 million. All units in the division traded well.

 

At Wipac, we completed our withdrawal from high volume automotive antennas and cables. The business segment traded profitably in this final year, but the exit was well timed and rising costs in China would have threatened future profitability. Wipac's LED based supercar lighting business continues to grow strongly and we are winning further design mandates. This growth will replace the contribution from antenna sales in the current year.

 

From the beginning of the new financial year we have combined our Wipac and LED optics business units to form a new LED Technologies division. We continue to develop innovative solutions in LED lighting. We have produced a very compact forward lighting unit for supercar applications. Prototype units were shown publically on a concept car at the Beijing motor show earlier this year, and we expect these units to enter production in 2013. We have developed a LED light engine for street lighting which we believe to be the most efficient and cost effective solution on the market today. The module is at the heart of the new CODA street light range by Woodhouse, previewed at the Lightscene show (Institution of Lighting Professionals) earlier this year and due for launch in September. Both of these highly innovative products rely on state-of-the-art freeform optic designs

 

The Precision Engineering businesses delivered steady growth and profit progression in the year.

 

 

Ian Williamson

 

12 June 2012

 

 

 

 

Finance director's review

 

 

Financial summary

 

	2012 £million	2011 £million
Revenue	93.3	88.6
Divisional operating profit	8.0	7.2
Unallocated	(1.4)	(1.3)
Underlying operating profit from continuing operations	6.6	5.9
Exceptional items	(1.8)	0.2
Net bank interest	(0.6)	(0.3)
IAS 19 net financing credit	1.3	1.0
Profit before tax	5.5	6.8
Income tax expense	(0.9)	(0.8)
Loss on discontinued operations	0.0	(0.1)
Profit attributable to ordinary shareholders	4.6	5.9
Ordinary dividend	(1.4)	(1.3)
Surplus for the year	3.2	4.6
Divisional operating margin from continuing operations	8.6%	8.2%
Basic earnings per share	7.5p	9.6p
Underlying earnings per share	9.7p	9.6p

 

The group generated turnover of £93.3 million (2011 - £88.6 million) in the financial year, representing a 5.2% increase on the prior year. Revenues in Technical Plastics increased by £2.5 million reflecting good growth in our US and Indian businesses. Revenues in Precision Products increased by £2.0 million benefiting from further growth in Wipac's LED based supercar lighting business which more than offset the impact of our withdrawal from the automotive antennas and cables business. .

 

Divisional operating profit was £8.0 million (2011 - £7.2 million) and underlying operating profit from continuing operations was £6.6 million (2011 - £5.9 million), an increase of 12.3% on the prior year. Unallocated costs, which predominantly comprise head office costs were £1.4 million (2011 - £1.3 million). As we expected, divisional operating profits in the second half of the year were much stronger than in the first half of the year in both of our trading divisions.

 

Profit before tax was £5.5 million (2011 - £6.8 million) after a net exceptional charge of £1.8 million (2011 - exceptional credit of £0.2 million). £1.6 million of this charge relates to the non-cash impairment resulting from our exit from the automotive communications business and the amount provided has increased to reflect a more prudent assessment of the realisable values of the remaining project equipment and inventories. The additional £0.5 million (2011 - £0.3 million) of rationalisation cost incurred represents a combination of redundancy cost and expenditure relating to a former group property. An exceptional pension credit of £0.3 million (2011 - £0.5 million) was booked in respect of the group's pension liability management programme.

 

Net bank interest was £0.6 million (2011 - £0.3 million) and this largely reflects the increase in the group's financing costs since the refinancing exercise was completed last November. Profit before tax was increased by a £1.3 million (2011 - £1.0 million) pension net financing credit under the provisions of IAS 19 "Employee Benefits".

 

The group tax charge for the year was £0.9 million (2011 - £0.8 million). This equates to an effective tax rate of 15.6% which compares to the current UK corporation tax rate of 26.0%. The lower effective rate is due to lower applicable rates on deferred tax as well as the recognition of prior period losses.

 

Basic earnings per share was 7.5 pence (2011 - 9.6 pence) and underlying earnings per share was 9.7 pence (2011 - 9.6 pence).

 

The profit attributable to ordinary shareholders was £4.6 million (2011 - £5.9 million).

 

The board is recommending a final dividend of 1.65 pence per ordinary share (2011 - 1.5 pence).

 

Net debt and gearing

 

	2012 £million	2011 £million
Underlying cash flow	12.0	8.9
Interest and tax	(1.3)	(0.8)
Capital expenditure	(4.2)	(7.0)
Free cash flow	6.5	1.1
Pension payments above regular cost	(1.6)	(1.6)
Non recurring	0.4	(0.5)
Proceeds from issue of share capital	0.1	0.2
Performance share plan awards	(0.1)	(0.4)
Equity dividends	(1.4)	(1.2)
Cash flow from corporate activities	3.9	(2.4)
Development expenditure	(2.6)	(2.1)
Acquisitions and disposals	(0.6)	(0.2)
Exchange movement	0.4	0.2
Decrease / (increase) in net debt in year	1.1	(4.5)

 

Net debt comprises interest bearing loans and borrowings less cash and cash deposits.

 

Group debt reduced to £18.0 million at 31 March 2012 (2011 - £19.1 million). This represents gearing of 28.8% (2011 - 31.3%) after excluding the net pension deficit. The improvement in the group debt number was mainly due to stronger operating cash flows which benefitted from a reduction in working capital. Underlying cash flow from operations was £12.0 million (2011 - £8.9 million) and free cash flow was £6.5 million (2011 - £1.1 million).

 

Group capital expenditure was £4.2 million (2011 - £7.0 million) representing 112.4% of the total group depreciation charge (2011 - 224.3%). The majority of the capital expenditure was focussed on our medical facilities in the UK and the US.

 

Pension contributions of £1.6 million (2011 - £1.6 million) above the regular pension charge were made during the year. This amount included £1.0 million in respect of the annual recovery plan payment and £0.6 million of scheme administration costs, including the annual Pension Protection Fund levy, which are borne by the company.

 

Non recurring cash inflows were £0.4 million (2011 - £0.5 million outflow) and were generated primarily from the sale of our last remaining surplus property in France. Development expenditure of £2.6 million (2011 - £2.1 million) was capitalised during the year, of which £2.0 million related to CIT and £0.6 million related to PDL and CDS. In addition, a net £0.6 million (2011 - £0.2 million) was expended on acquisitions and disposals and this amount primarily relates to the increase in the group's holding in PDL.

 

Financing

 

During the financial year the group's committed bank facilities of £20.0 million were renewed with its existing banks and these facilities now extend until November 2015. These facilities, which were drawn to £19.1 million as at 31 March 2012, are competitively priced, especially in the current market. The covenant terms broadly reflect the terms negotiated in the group's previous agreements. The two main covenants are interest cover and the ratio of net debt to EBITDA and the group has a comfortable level of headroom on both of these covenants as at 31 March 2012. The group also has overdraft and other facilities totalling £11.5 million.

 

Under the group borrowing agreements the bank loans are secured by guarantees from certain group companies and by fixed and floating charges over the current assets of the group's three main UK trading subsidiaries.

 

Pensions

 

As at 31 March 2012 the group pension scheme deficit, as calculated under the provisions of IAS 19 "Employee Benefits", was £17.2 million, net of deferred tax (2011 - £6.7 million). The defined benefit pension liability increased to £172.8 million (2011 - £157.5 million) due to two factors. Firstly, the discount rate assumption was significantly lower than at the previous period end, reflecting the material reduction in corporate bond yields. Secondly, the group tightened its scheme specific mortality assumptions to reflect current expectations of life expectancy for pensioners and deferred members. The fair value of the plan assets increased to £150.2 million (2011 - £148.4 million).

 

There was no current year IAS 19 service cost due to the cessation of benefit accrual in the previous financial year (2011 - £0.2 million). The consolidated income statement does include a £0.3 million credit which results from the group's ongoing liability management programme (2011 - £0.5 million), as well as an IAS 19 financing credit of £1.3 million (2011 - £1.0 million). This financing credit represents the excess of the expected return on the pension scheme assets over the interest charged on the pension scheme liability. During the current financial year we expect the financing credit to reduce substantially and during the financial year ended 31 March 2014 the fundamental changes to the IAS 19 standard would result in a financing charge being reflected where a pension scheme is in deficit.

 

The cash cost of the pension scheme to the group during the financial year was £1.6 million (2011 - £1.8 million). This includes scheme administration costs of £0.6 million and the annual additional contribution of £1.0 million under the current four year recovery plan. The triennial valuation date was 31 March 2012 and based on this valuation the group will be agreeing a revised recovery plan with the trustees. Early discussions indicate that it is likely that the annual recovery plan payments will remain at a similar level.

 

At 31 March 2012 group properties with a net book value of £6.6 million and cash of £1.2 million were subject to a registered charge in favour of the group pension scheme.

 

Conductive Inkjet Technology

 

CIT reported revenues of £0.3 million (2011 - 0.5 million) in the year and made an operating loss of £0.2 million (2011 - £0.1 million) predominantly due to depreciation charges on fixed assets and the amortisation of intangible assets. CIT is expected to generate a significant level of turnover during the current financial year and the amortisation charge on the intangible assets of the business is also expected to increase as CIT commercialises its technology.

 

CIT incurred capital expenditure of £0.3 million (2011 - £1.1 million) during the year. In addition, the total amount of development expenditure capitalised was £2.0 million (2011 - £1.6 million). The group balance sheet now includes intangible assets totalling £16.8 million in respect of CIT, with £9.8 million of this amount being capitalised research and development cost funded by the group. The remaining £7.0 million represents the fair value assigned to the intellectual property that arose from the accounting treatment of the previous acquisitions of the minority holdings from our original joint venture partner. The group's policy is to conduct an annual impairment review in respect of the goodwill and to amortise the other intangible assets on a straight line basis over the estimated economic life of the intangible asset which is judged to be a period of up to twelve years from the date upon which the patent or related development expenditure becomes available for use. During the financial year amortisation of £0.2 million (2011 - £0.2 million) was charged to the income statement.

 

Platform Diagnostics and Carclo Diagnostic Solutions

 

During the year the group increased its interest in PDL from 32.7% to 51.0% at an additional cost of £0.5 million in cash. Prior to the acquisition PDL was reflected in the group as an associate. Since 31 January 2012, the date of the acquisition, PDL has been accounted for as a subsidiary in accordance with IFRS 3 'Business Combinations'. As a result, an additional £2.4 million of net assets were recognised in the group balance sheet at fair value, increasing intangible assets in the group balance sheet by £2.1 million. In the financial year a further £0.6 million of development costs were capitalised in respect of PDL and CDS.

 

 

Robert Brooksbank

 

12 June 2012

 

 

 

Consolidated income statement

year ended 31 March

 

	Notes	2012£000		2011£000
Revenue	2	93,267		88,645
Underlying operating profit
Operating profit before exceptional items		6,645		5,917
- rationalisation costs		(528)		(274)
- exit from Ford volume automotive communication business		(1,560)		-
- exceptional credit in respect of retirement benefits		300		500
After exceptional items		4,857		6,143
Operating profit	2	4,857		6,143
Finance revenue		9,855		9,828
Finance expense		(9,214)		(9,199)
Profit before tax		5,498		6,772
Income tax expense		(856)		(770)
Profit after tax but before loss on discontinued operations		4,642		6,002
Loss on discontinued operations, net of tax		(19)		(85)
Profit after tax		4,623		5,917
Attributable to -
Equity holders of the parent		4,637		5,917
Non-controlling interests		(14)		-
		4,623		5,917
Earnings per ordinary share	4
Basic - continuing operations		7.5 p		9.8 p
Basic - discontinued operations		0.0 p		(0.2) p
Basic - total		7.5 p		9.6 p
Diluted - continuing operations		7.5 p		9.8 p
Diluted - discontinued operations		0.0 p		(0.2) p
Diluted - total		7.5 p		9.6 p

 

 

Consolidated statement of comprehensive income

year ended 31 March

 

	2012£000		2011£000
Profit for the period	4,623		5,917
Other comprehensive income -
Foreign exchange translation differences	(546)		(298)
Actuarial (losses) / gains on defined benefit scheme	(16,700)		6,463
Actuarial gain due to statutory change to CPI for deferred revaluation and pension increases	-		1,440
Taxation on items taken directly to equity -
Deferred tax	3,464		(2,461)
Corporation tax	(5)		3
Other comprehensive income, net of tax	(13,787)		5,147
Total comprehensive income for the period	(9,164)		11,064
Attributable to -
Equity holders of the parent	(9,150)		11,064
Non-controlling interests	(14)		-
Total comprehensive income for the period	(9,164)		11,064

  Consolidated statement of financial position

as at 31 March

 

		Notes	2012 £000		2011 £000
Assets
Intangible assets			40,827		36,406
Property, plant and equipment			27,983		29,950
Investments			6		747
Deferred tax assets			10,818		6,635
Total non current assets			79,634		73,738
Inventories			11,704		12,343
Trade and other receivables			16,754		18,831
Cash and cash deposits			9,485		11,048
Non current assets classified as held for sale			350		221
Total current assets			38,293		42,443
Total assets			117,927		116,181
Liabilities
Interest bearing loans and borrowings			19,135		19,002
Deferred tax liabilities			5,922		5,141
Retirement benefit obligations		6	22,597		9,067
Total non current liabilities			47,654		33,210
Trade and other payables			14,335		15,551
Current tax liabilities			2,208		1,941
Provisions			130		-
Interest bearing loans and borrowings			8,326		11,148
Total current liabilities			24,999		28,640
Total liabilities			72,653		61,850
Net assets			45,274		54,331
Equity
Ordinary share capital issued		7	3,090		3,078
Share premium			8,296		8,189
Other reserves			3,584		3,584
Translation reserve			4,188		4,734
Retained earnings			25,008		34,746
Total equity attributable to equity holders of the parent			44,166		54,331
Non-controlling interests			1,108		-
Total equity			45,274		54,331
Approved by the board of directors and signed on its behalf by -
Christopher Ross	} directors
Robert Brooksbank
12 June 2012

 

 

Consolidated statement of changes in equity

 

Attributable to equity holders of the company

 

	Share		Share		Translation		Other		Retained				Non-controlling		Total
	capital		premium		reserve		reserves		earnings		Total		interests		Equity
	£000		£000		£000		£000		£000		£000		£000		£000
Balance at 1 April 2010	3,071		8,042		5,032		3,584		24,878		44,607		-		44,607
Profit for the period	-		-		-		-		5,917		5,917		-		5,917
Other comprehensive income -
Foreign exchange translation differences	-		-		(298)		-		-		(298)		-		(298)
Actuarial gains on defined benefit scheme	-		-		-		-		6,463		6,463		-		6,463
Actuarial gain due to statutory change to CPI for deferred
revaluation and pension increases	-		-		-		-		1,440		1,440		-		1,440
Taxation on items taken directly to equity	-		-		-		-		(2,458)		(2,458)		-		(2,458)
Transactions with owners recorded directly in equity -
Share based payments	-		-		-		-		144		144		-		144
Dividends to shareholders	-		-		-		-		(1,260)		(1,260)		-		(1,260)
Exercise of share options	7		147		-		-		-		154		-		154
Proceeds from sale of own shares	-		-		-		-		21		21		-		21
Performance share plan awards	-		-		-		-		(406)		(406)		-		(406)
Adjustment to deferred consideration	-		-		-		-		7		7		-		7
Balance at 31 March 2011	3,078		8,189		4,734		3,584		34,746		54,331		-		54,331
Balance at 1 April 2011	3,078		8,189		4,734		3,584		34,746		54,331		-		54,331
Profit for the period	-		-		-		-		4,637		4,637		(14)		4,623
Other comprehensive income -
Foreign exchange translation differences	-		-		(546)		-		-		(546)		-		(546)
Actuarial losses on defined benefit scheme	-		-		-		-		(16,700)		(16,700)		-		(16,700)
Taxation on items taken directly to equity	-		-		-		-		3,459		3,459		-		3,459
Transactions with owners recorded directly in equity -
Share based payments	-		-		-		-		183		183		-		183
Dividends to shareholders	-		-		-		-		(1,390)		(1,390)		-		(1,390)
Exercise of share options	3		41		-		-		-		44		-		44
Proceeds from sale of own shares	-		-		-		-		19		19		-		19
Performance share plan awards	9		66		-		-		(187)		(112)		-		(112)
Acquisition of subsidiary with non-controlling interests	-		-		-		-		-		-		1,122		1,122
Taxation on items recorded directly in equity	-		-		-		-		241		241	-	-		241
Balance at 31 March 2012	3,090		8,296		4,188		3,584		25,008		44,166		1,108		45,274

 

 

Consolidated statement of cash flows

year ended 31 March

 

	Notes	2012 £000		2011 £000
Cash generated from operations	8	10,417		6,800
Interest paid		(620)		(582)
Tax paid		(734)		(422)
Net cash from operating activities		9,063		5,796
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		405		52
Interest received		13		161
Cash flow on discontinued operations		(70)		(85)
Acquisition of business undertaking, net of cash acquired		(239)		-
Acquisition of property, plant and equipment		(4,120)		(6,924)
Acquisition of intangible assets - computer software		(66)		(49)
Investment in Platform Diagnostics Limited, whilst an associate		(250)		(135)
Development expenditure		(2,567)		(2,073)
Net cash from investing activities		(6,894)		(9,053)
Cash flows from financing activities
Proceeds from exercise of share options		44		154
Proceeds from sale of own shares		19		21
Drawings on term loan facilities		500		750
Repayment of borrowings		-		(250)
Cash outflow in respect of performance share plan awards		(112)		(406)
Dividends paid		(1,358)		(1,227)
Net cash from financing activities		(907)		(958)
Net increase / (decrease) in cash and cash equivalents		1,262		(4,215)
Cash and cash equivalents at beginning of period		(100)		4,303
Effect of exchange rate fluctuations on cash held		(3)		(188)
Cash and cash equivalents at end of period		1,159		(100)
Cash and cash equivalents comprise -
Cash and cash deposits		9,485		11,048
Bank overdrafts		(8,326)		(11,148)
		1,159		(100)

 

 

Notes on the accounts

 

1. Notes on the preliminary statement

 

Basis of preparation

 

Whilst the financial information included in this preliminary statement has been prepared on the basis of the requirements of IFRSs in issue, as adopted by the European Union and effective at 31 March 2012, this statement does not itself contain sufficient information to comply with IFRS. The group expects to publish full consolidated financial statements on 29 June 2012.

 

The financial Information set out in this preliminary statement does not constitute the company's consolidated financial statements for the years ended 31 March 2012 or 2011, but is derived from those financial statements. Statutory financial statements for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the company's annual general meeting. The auditor, KPMG Audit Plc, has reported on those financial statements; its report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006 in respect of the financial statements for 2012 and 2011.

 

Directors' liability

 

Neither the company nor the directors accept any liability to any person in relation to this report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90(A) of the Financial Services and Markets Act 2000.

 

2. Segment reporting

 

At 31 March 2012, the group was organised into three, separately managed, business segments - Technical Plastics, Precision Products and Conductive Inkjet Technology. These are the segments for which summarised management information is presented to the group's chief operating decision maker (comprising the main board and general executive committee).

 

The Technical Plastics segment supplies fine tolerance, injection moulded plastic components, which are used in medical, optical and electronics products. This business operates internationally in a fast growing and dynamic market underpinned by rapid technological development.

 

The Precision Products segment supplies systems to the premium automotive and aerospace industries and is a leader in the development of high power LED lighting for supercars.

 

The Conductive Inkjet Technology segment undertakes applied research into the digital printing of conductive metals on to plastic substrates.

 

Discontinued operations relate to the disposal of the group's automotive control cables business in May 2006 and the card clothing business in June 2005.

 

Transfer pricing between business segments is set on an arm's length basis. Segmental revenues and results include transfers between business segments. Those transfers are eliminated on consolidation.

 

The group's geographical segments are based on the location of the group's assets. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers.

 

 

Analysis by business segment

 

The segment results for the year ended 31 March 2012 were as follows -

 

	Technical Plastics£000	Precision Products£000	Conductive Inkjet Technology£000	Unallocated £000	Eliminations £000	Group total £000
Consolidated income statement
Total revenue	58,306	35,105	296	-	(440)	93,267
Less inter-segment revenue	(359)	(81)	-	-	440	-
Total external revenue	57,947	35,024	296	-	-	93,267
Expenses	(52,902)	(31,853)	(493)	(1,374)	-	(86,622)
Underlying operating profit	5,045	3,171	(197)	(1,374)	-	6,645
Rationalisation costs	(461)	(24)	-	(43)	-	(528)
Exit from Ford volume automotive communication business	-	(1,560)	-	-		(1,560)
Exceptional credit in respect of retirement benefits	-	-	-	300	-	300
Operating profit	4,584	1,587	(197)	(1,117)	-	4,857
Net finance income						641
Income tax expense						(856)
Loss on discontinued operations, net of tax						(19)
Profit after tax						4,623
Consolidated statement of financial position
Segment assets	60,497	21,999	19,416	16,015	-	117,927
Segment liabilities	(9,598)	(6,130)	(742)	(56,183)	-	(72,653)
Net assets	50,899	15,869	18,674	(40,168)	-	45,274
Other segmental information
Capital expenditure on property, plant and equipment	2,732	697	289	16	-	3,734
Capital expenditure on computer software	26	24	-	16	-	66
Capital expenditure on other intangibles	-	15	1,975	576	-	2,566
Depreciation	2,467	635	196	23	-	3,321
Amortisation of computer software	13	30	-	18	-	61
Amortisation of other intangibles	-	141	193	-	-	334

 

Analysis by business segment

 

The segment results for the year ended 31 March 2011 were as follows -

 

	Technical Plastics£000	Precision Products£000	Conductive Inkjet Technology£000	Unallocated £000			Eliminations£000					Group total£000
Consolidated income statement
Total revenue	55,798	33,118	499		-				(770)			88,645
Less inter-segment revenue	(602)	(168)	-		-				770			-
Total external revenue	55,196	32,950	499		-				-			88,645
Expenses	(50,158)	(30,746)	(513)		(1,311)				-			(82,728)
Underlying operating profit	5,038	2,204	(14)		(1,311)				-			5,917
Rationalisation costs	(215)	(32)	(27)		-				-			(274)
Exceptional credit in respect of retirement benefits	-	-	-		500				-			500
Operating profit	4,823	2,172	(41)		(811)				-			6,143
Net finance income												629
Income tax expense												(770)
Loss on discontinued operations, net of tax												(85)
Profit after tax												5,917
Consolidated statement of financial position
Segment assets	61,992	27,094	17,343		9,752			-				116,181
Segment liabilities	(11,143)	(11,253)	(769)		(38,685)			-				(61,850)
Net assets	50,849	15,841	16,574		(28,933)			-				54,331
Other segmental information
Capital expenditure on property, plant and equipment	3,415	2,602	1,131		40			-				7,188
Capital expenditure on computer software	-	16	-		33			-				49
Capital expenditure on other intangibles	-	336	1,636		101			-				2,073
Depreciation	2,371	657	152		24			-				3,204
Amortisation of computer software	16	35	-		14			-				65
Amortisation of other intangibles	-	58	193		-			-				251

 

 

Analysis by geographical segment

 

The business operates in three main geographical regions - the United Kingdom, North America and in lower cost regions such as the Czech Republic, China and India.

 

The geographic analysis was as follows -

 

	External revenue				Segment assets				Expenditure on tangible fixed assets and computer software
	2012 £000		2011 £000		2012 £000		2011 £000		2012 £000		2011 £000
United Kingdom	27,092		26,678		9,306		18,632		2,480		5,985
North America	23,408		22,573		16,562		15,926		971		870
Rest of world	42,767		39,394		19,406		19,773		349		382
	93,267		88,645		45,274		54,331		3,800		7,237

 

The analysis of segment revenue represents revenue from external customers based upon the location of the customer.

 

The analysis of segment assets and capital expenditure is based upon the location of the assets.

 

The material components of unallocated segment assets and liabilities are retirement benefit obligation net liabilities of £22.597 million (2011 - £9.067 million) and net borrowings of £21.366 million (2011 - £18.903 million).

 

One Technical Plastics customer accounted for 18.8% of group revenues (2011 - 15.8%) and one Precision Products customer accounted for 15.5% of group revenues (2011 - 9.8%) and similar proportions of trade receivables. No other customer accounted for more than 10.0% of revenues in the year or prior year.

 

Revenue in our Precision Products division consisted of £27.589 million in respect of automotive products (2011 - £26.417 million) and £7.516 million in respect of our precision engineering products (2011 - £6.701 million).

 

The unallocated segment relates to central costs and non-trading companies.

 

Deferred tax assets by geographical location are as follows, United Kingdom £9.867 million (2011 - £5.946 million), North America £0.835 million (2011 - £0.603 million), Rest of world £0.116 million (2011 - £0.086 million).

 

3. Acquisition of subsidiary

 

At the beginning of the financial year Carclo owned 12,360 A1 ordinary shares in Platform Diagnostics Limited ("PDL"). This represented a 32.7% stake in the business. On 19 August 2011 the group acquired a further 7,056 A1 ordinary shares increasing its holding to 43.3% and on 31 January 2012 acquired a further 7,057 A1 ordinary shares, increasing the group's holding in PDL to 51.0% at which point PDL was accounted for as a subsidiary of Carclo plc.

 

PDL is involved in applied research into the development of digital diagnostic technologies for the immunoassay market. PDL contributed no revenues and losses of £0.014 million to the group for the period from 1 February 2012 and had it been a subsidiary for the full year to 31 March 2012 it would have contributed no revenues and losses of £0.064 million.

 

The following table summarises the consideration transferred to acquire PDL and the amounts of identified assets acquired and liabilities assumed at the acquisition date, as well as the fair value of the non-controlling interest in PDL at the acquisition date.

 

	£000
Fair value of consideration transferred
Cash	250
Fair value of the group's investment in PDL held before the business combination	991
Fair value of the non-controlling interest in PDL	1,122
	2,363
Recognised amounts of identifiable assets acquired and liabilities assumed
Investments	23
Intangible assets	2,133
Trade and other receivables	516
Cash and cash equivalents	11
Trade and other payables	(393)
Deferred tax	(443)
Total identifiable net assets	1,847
Goodwill	516

 

Taking control of PDL will enable the group to maximise the development and commercialisation potential of PDL's low cost, single use, Point-of-Care quantitative test for d-Dimer.

 

The goodwill, which is not expected to be deductible for tax purposes, is attributable mainly to the quality of the development of their product by PDL to this point in time, and the synergies expected to be achieved from the additional resources that the group can add to this.

 

The group incurred acquisition-related costs of £0.014 million related to external legal fees. These costs have been recognised in other operating charges in the group's consolidated statement of comprehensive income.

 

The fair value of intangible assets (PDL's development expenditure) has been determined based on the expected future revenues to be received from those assets. All other assets and liabilities have been determined at their book value at the time of acquisition. The fair value of the non-controlling interest of £1.122 million was estimated by applying the above methods.

 

The fair value of the acquired receivables reflects the gross contractual amounts receivable as they are expected to be recovered in full.

 

As a result of Carclo plc obtaining control over PDL, the entity's previously held 43.3% interest was remeasured to fair value, resulting in a gain of £0.002 million.

 

 

4. Earnings per share

 

The calculation of basic earnings per share is based on the profit attributable to equity holders of the parent company divided by the weighted average number of ordinary shares outstanding during the year.

 

The calculation of diluted earnings per share is based on profit attributable to equity holders of the parent company divided by the weighted average number of ordinary shares outstanding during the year (adjusted for dilutive options).

 

The following details the profit and average number of shares used in calculating the basic and diluted earnings per share -

 

		2012		2011
		£000		£000
Profit after tax from continuing operations		4,642		6,002
Loss attributable to non-controlling interests		14		-
Profit attributable to ordinary shareholders from continuing operations		4,656		6,002
Loss on discontinued operations, net of tax		(19)		(85)
Profit after tax, attributable to equity holders of the parent		4,637		5,917
		2012		2011
		Shares		Shares
Weighted average number of ordinary shares in the year		61,715,997		61,425,277
Effect of share options in issue		336,894		268,262
Weighted average number of ordinary shares (diluted) in the year		62,052,891		61,693,539

 

In addition to the above, the company also calculates an earnings per share on the underlying profits as the board believe this to be a better yardstick against which to judge the progress of the group. Underlying profit is defined as profit before rationalisation costs, one-off retirement benefit effects, exceptional bad debts, business closure costs and the impact of property and business disposals, net of attributable taxes.

 

The following table reconciles the group's profit to underlying profit used in the numerator in calculating underlying earnings per share -

 

		2012		2011
		£000		£000
Profit after tax, attributable to equity holders of the parent		4,637		5,917
Rationalisation costs, net of tax		391		243
Exceptional credit in respect of retirement benefits, net of tax		(222)		(360)
Exit from Ford volume automotive communication business net of tax		1,154		-
Loss on disposal of discontinued operations, net of tax		19		85
Underlying profit attributable to equity holders of the parent		5,979		5,885

 

 The following table summarises the earnings per share figures based on the above data -

 

		2012		2011
		Pence		Pence
Basic - continuing operations		7.5		9.8
Basic - discontinued operations		0.0		(0.2)
Basic - total		7.5		9.6
Diluted - continuing operations		7.5		9.8
Diluted - discontinued operations		0.0		(0.2)
Diluted - total		7.5		9.6
Underlying earnings per share - basic		9.7		9.6
Underlying earnings per share - diluted		9.6		9.5

 

 

5. Dividends paid and proposed

 

Ordinary dividends per 5 pence share declared in the period comprised -

 

				2012				2011
		£000		Pence		£000		Pence
Final dividend for 2009/10		-		-		828		1.35
Interim dividend for 2010/11		-		-		432		0.70
Final dividend for 2010/11		926		1.50		-		-
Interim dividend for 2011/12		464		0.75		-		-
		1,390		2.25		1,260		2.05

 

 

The directors are proposing a final dividend of 1.65 pence per ordinary share for the year ended 31 March 2012. If approved at the annual general meeting on 6 September 2012, the dividend payment totalling £1.020 million will be paid on 21 September 2012 to shareholders on the share register at close of business on 17 August 2012.

 

 

6. Retirement benefit obligations

 

The group operates a defined benefit UK pension scheme which provides pensions based on service and final pay. The defined benefit scheme is now closed to new entrants who now have the option of entering into a defined contribution scheme. During the year ended 31 March 2011, the company elected to cease future accrual for existing members of the defined benefit scheme. The assets of the defined benefit scheme are held in a separate trustee administered pension fund. Outside of the UK, retirement benefits are determined according to local practice and funded accordingly.

 

The amounts recognised in the balance sheet in respect of the defined benefit scheme were as follows - 

 

		2012		2011
		£000		£000
Present value of funded obligations		(172,761)		(157,501)
Fair value of scheme assets		150,164		148,434
Recognised liability for defined benefit obligations		(22,597)		(9,067)
Movements in the net liability for defined benefit obligations recognised in the consolidated statement of financial position -
		2012		2011
		£000		£000
Net liability for defined benefit obligations at the start of the year		(9,067)		(20,087)
Contributions paid		1,591		1,844
Net income recognised in the consolidated income statement (see below)		1,579		1,273
Actuarial (losses) / gains recognised directly in equity		(16,700)		6,463
Actuarial gain due to statutory change to CPI for deferred revaluation and pension increases		-		1,440
Net liability for defined benefit obligations		(22,597)		(9,067)
Movements in the present value of defined benefit obligations and scheme assets -
		2012		2011
		£000		£000
Liability at the start of the year		157,501		161,972
Current service cost		-		237
Exceptional credit in respect of retirement benefits
In respect of past service costs		(300)		(400)
In respect of gains on curtailments		-		(100)
Interest cost		8,563		8,658
Actuarial losses / (gains)		16,233		(2,348)
Actuarial gain due to statutory change to CPI for deferred revaluation and pension increases		-		(1,440)
Benefits paid		(9,236)		(9,193)
Contributions by members		-		115
Liability at the end of the year		172,761		157,501

 

 

		2012		2011
		£000		£000
Assets at the start of the year		148,434		141,885
Expected return on scheme assets		9,842		9,668
Actuarial (losses) / gains		(467)		4,115
Contributions by employer		1,591		1,844
Contribution by members		-		115
Benefits paid		(9,236)		(9,193)
Assets at the end of the year		150,164		148,434
Actual return on scheme assets		9,375		13,783
The fair value of scheme asset investments was as follows -
		2012		2011
		£000		£000
Equities		61,219		59,107
Bonds		62,687		61,307
Other		26,258		28,020
		150,164		148,434
The income recognised in the consolidated income statement -
		2012		2011
		£000		£000
Current service costs		-		237
Exceptional credit in respect of retirement benefits		(300)		(500)
Interest on obligation		8,563		8,658
Expected return on plan assets		(9,842)		(9,668)
		(1,579)		(1,273)
The income is recognised in the following line items in the consolidated income statement -
		2012		2011
		£000		£000
Charged to operating profit		-		237
Exceptional credit in respect of retirement benefits		(300)		(500)
Other finance revenue and expense - retirement benefits		(1,279)		(1,010)
		(1,579)		(1,273)

 

 

The group recognises actuarial gains and losses immediately on the balance sheet through the statement of comprehensive income. The cumulative actuarial net loss reported in the statement of comprehensive income since 1 April 2004 is £21.866 million.

 

The current best estimate of employer cash contributions to be paid in the year ending 31 March 2013 is £1.581 million. This comprises a payment of £0.981 million as part of the agreed recovery plan and £0.600 million in respect of pension administration costs.

 

Exceptional credits in respect of retirement benefits of £0.300 million in the year ended 31 March 2012 consisted of a credit in respect of a pension increase exchange exercise conducted in the year (2011 - £0.400 million). In addition a credit of £0.100 million in respect of gains on curtailments following the scheme being closed to future accrual was recognised in the prior year.

 

 

The principal actuarial assumptions at the balance sheet date (expressed as weighted averages) were -

 

		2012	2011	2010	2009	2008
Discount rate at 31 March		4.9%	5.6%	5.5%	7.0%	6.6%
Expected return on plan assets at 31 March		6.8%	7.0%	7.7%	7.1%	7.2%
Future salary increases		N/A	N/A	4.2%	3.2%	4.5%
Inflation		3.3%	3.6%	3.7%	2.7%	3.5%
Future pension increases		2.2%	2.9%	3.7%	2.7%	3.5%
Life expectancy for a male (current pensioner) aged 65		18.0 years	17.1 years	17.0 years	16.7 years	17.3 years
Life expectancy at 65 for a male aged 40		19.7 years	18.8 years	18.7 years	18.0 years	18.7 years

It is assumed that 100% of the post A-Day maximum for actives and deferreds will be commuted for cash (2011 - 100%).

 

The history of the schemes' deficits and experience gains and losses is shown in the following table -

 

		2012 £000	2011 £000	2010 £000	2009 £000	2008 £000
Present value of funded obligation		(172,761)	(157,501)	(161,972)	(131,657)	(152,655)
Fair value of scheme asset investments		150,164	148,434	141,885	113,733	153,512
Recognised (liability) / asset for defined benefit obligations		(22,597)	(9,067)	(20,087)	(17,924)	857
Actual return on scheme assets		9,375	13,783	34,949	(33,167)	(7,271)
Actuarial (losses) / gains on scheme liabilities		(16,233)	3,788	(30,104)	22,784	28,032

 

 

7. Ordinary share capital

 

		Number of
		Shares		£000
Ordinary shares 5 pence each
Authorised at 31 March 2011 and 31 March 2012		80,000,000		4,000
Issued and fully paid at 31 March 2011		61,561,702		3,078
Shares issued on exercise of share options		235,000		12
Issued and fully paid at 31 March 2012		61,796,702		3,090

 

During the course of the financial year 235,000 shares were issued in respect of share options at an average exercise price of 50.6 pence per ordinary share. The shares are fully paid.

 

 

8. Cash generated from operations

 

	2012		2011
	£000		£000
Operating profit	4,857		6,143
Adjustments for -
Pension fund contributions in excess of service costs	(1,591)		(1,607)
Depreciation charge	3,321		3,204
Amortisation of intangible assets	395		316
Share of losses in associated undertaking	13		10
Exceptional tangible fixed asset write down, arising on rationalisation of business	1,701		-
Provision for site closure	130		(502)
Profit on disposal of other plant and equipment	(30)		(42)
Profit on business disposal	(2)		-
Exceptional credit in respect of retirement benefits	(300)		(500)
Share based payment charge	183		144
Operating cash flow before changes in working capital	8,677		7,166
Changes in working capital (excluding the effects of acquisition and disposal of subsidiaries)
Decrease / (increase) in inventories	572		(2,192)
Decrease in trade and other receivables	1,939		1,441
(Decrease) / increase in trade and other payables	(771)		385
Cash generated from operations	10,417		6,800